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A bumper profit report and dividend increase from Westpac helped the share market launch a week of bank earnings with a modest gain.
The S&P/ASX 200 rallied as much as 42 points in early action before trimming its advance to two points or 0.03 per cent. The financial sector kept the index above-water, rising 1.15 per cent. Westpac jumped more than 4 per cent to surpass its level before the start of the pandemic.
What’s driving the market
The scale of the economic recovery over the second half of last year was underlined by a 256 per cent jump in Westpac‘s first-half cash earnings from the same period in FY2020 to a stronger-than-expected $3.537 billion. Net profit increased 189 per cent to $3.443 billion.
“It has been a promising start to the year with increased cash earnings, growth in mortgages and continued balance sheet strength,” CEO Peter King said. “Our Australian mortgage book increased $2.6 billion over the past six months, with good growth in owner occupier loans partly offset by lower investor lending. Owner occupier loans increased 3 per cent, with first home buyers making up 13 per cent of new loans,” he added.
The bank increased its interim dividend to 58 cents per share. Both the dividend and cash profit were higher than analysts had predicted.
The result set a positive tone for a week that will bring interim earnings reports from ANZ on Wednesday and NAB on Thursday. Westpac shares soared 4.48 per cent per cent to their highest since November 2019. ANZ put on 0.64 per cent, NAB 1.89 per cent and CBA 0.54 per cent.
Property stocks were also strong this morning, helping offset declines in technology, energy and materials following a soft end to the month in the US on Friday. The S&P 500 eased 0.72 per cent to trim its gain for the month to around 5 per cent. The ASX 200 put on 3.5 per cent over the same period.
US futures climbed this morning ahead of another big week of corporate quarterly earnings and the April employment report. S&P 500 futures rallied 13 points or 0.3 per cent.
“Investors are gearing up for another busy earnings week capped off with a widely watched jobs report. Given the positive economic and earnings news, the path of least resistance appears higher,” Jack Ablin, chief investment officer at Cresset Capital, told CNBC.
ASX gains dissipated as Asian markets deteriorated. The Asia Dow slid 0.49 per cent. Hong Kong’s Hang Seng slumped 1.5 per cent. Markets in mainland China and Japan were closed for a three-day public holiday.
Going up
REITs surged as CoreLogic data showed the property market continued to run red hot last month National home prices increased by 1.8 per cent for a 12-month increase of 7.8 per cent. Some regional areas saw gains of up to 4 per cent.
“House prices strong. Stock prices strong. There is a massive wealth effect continuing to unfold across Australia. Positive for household spending and it all but extinguishes risks on household debt,” economist Stephen Koukoulas tweeted.
Abacus Property Group climbed 1.82 per cent, Growthpoint 1.74 per cent and Goodman Group 1.48 per cent.
Seven West rose 2.63 per cent on news the media group had finalised a partnership with Google and awaited sign-off from Facebook on another deal. The company also announced Q3 ad revenue had increased to the upper end of guidance of 7 – 10 per cent.
Telstra climbed 2.51 per cent to a two-week peak. CSL rose 0.11 per cent, Brambles 0.19 per cent and Aristocrat Leisure 0.73 per cent. Supermarket Coles gained 0.4 per cent, while rival Woolworths sank 1.02 per cent.
Going down
Premier Investments fell 1.71 per cent after announcing it will return $15.6 million in JobKeeper payments to the Tax Office. The retailer previously faced criticism for retaining the funds as profits surged. The company said it remained confident in its ability to meet the market consensus full-year earnings target of $318 million.
Sleep apnoea specialist ResMed fell 4.39 per cent following broker downgrades in the wake of Friday’s poorly-received quarterly update.
Declines in iron ore, copper and crude weighed on the energy and materials sectors. Santos dropped 1.86 per cent, Woodside 1.26 per cent, BHP 1.25 per cent, Rio Tinto 0.78 per cent and Fortescue Metals 0.44 per cent.
Other markets
Oil added to Friday’s 1.9 per cent decline. Brent crude faded 18 cents or 0.27 per cent to US$66.58 a barrel. Gold lifted $5.50 or 0.3 per cent to US$1,773.20 an ounce.
The dollar was steady at 77.19 US cents.
